How to Structure the Sale of a Small Business

Walk away with a windfall? Expedite your exit? Leave a lasting legacy?

If you’re clear you want to sell but undecided on what you want to accomplish in the sale, we suggest you do some soul-searching. Your exit plan will depend on your selling goals, as will your deal structure once you find a buyer.

No two sellers are alike. For you, the best deal structure will be the one bringing the right balance of profit and peace of mind. Here’s how to structure the sale of a small business.


Did You Know...

Planning out your ideal deal structure well ahead of time is crucial to your successful business transition.

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How to Structure the Sale of a Small Business

Know What You Want

A high price, a fast sale, or satisfying terms? What’s favourable to you is often unfavourable to the buyer. You’re not likely to get everything you want, so know what you can compromise on.

And remember, your success in selling your business depends on many factors. Whatever you’re going for, there’s no guarantee you’ll get it, though following the right steps to sell will greatly increase your chances, as will thorough preparation.

If you take our Transition Success Program, you’ll learn how to define what you want from the sale. But here’s a quick tip. Well before putting your company on the market, ask yourself two questions: What can I be flexible on, and what are my non-negotiables? Here are examples of goals you might decide not to budge on:

  •  “Given my financial needs, I can’t come down on price.”
  •  “I need a big chunk of cash immediately upon selling.”
  •  “I need to find a buyer with the right skillset and mindset.”
  •  “The new owner needs to continue my business model and retain all my employees.”
  •  “I’ve been diagnosed with serious health problems and need to get out fast.”
  •  “One of my employees wants to buy the business, and I want to transfer it to her.”
senior man peaceful - how to structure the sale of a small business

Did You Know...

NEGOTIATING TIP: Keep something in your back pocket that would be easy for you to give up. If needed, you can offer it as a win to the buyer.

Structure the Right Deal

Congratulations! You’ve prepared your business, put it up for sale, and received an offer to purchase. When you negotiate the price, terms, and timelines, prepare to make trade-offs.

A typical deal might include a 20% down payment, 60% from a commercial lender, and 20% in seller financing, though deal structures can vary widely.  Here are examples of compromises you might make, depending on your goals:

  • GOAL: Get more cash up front. TRADE-OFF: Compromise on your price.
  • GOAL: Avoid seller financing. TRADE-OFFS: Lower your price, and extend your timeline.
  • GOAL: Offer seller financing for a better chance of closing the deal. TRADE-OFF: Accept less cash on closing, and let the buyer extend his payment over time.
  • GOAL: Get the full price. TRADE-OFF: Give up some terms, or offer more seller financing.


Final Thoughts

Whether you want to sell in Toronto, in the GTA or elsewhere in Ontario, a Certified Exit Planning Advisor (CEPA) and seasoned business broker at Transitions Business Brokers can help you get clear on your selling goals. Then, we can help you create and implement a business exit plan to sell on your desired timetable, on your own terms, without leaving money on the table.

Get a great deal, a successful transition, and a confident start in your next chapter! If you’re wondering how to structure the sale of your small business, engage the Transitions Specialists today.

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